Sound Enterprise: Cox Radio Goes Private

Cox Media Group has completed a transaction to take Cox Radio private, making it one of the few sizable deals to go forward in the radio industry this year. The buyout should relieve Cox of pressure from shareholders seeking immediate, short-term gains, allowing it to pursue more long-term growth strategies.

According to Cox Enterprises, to take Cox Radio private, Cox Media Group bought 10,327,500 outstanding shares of Cox Radio's common stock, including 327,000 belonging to Cox affiliates. After the transaction is complete, Cox Enterprises should own about 72,652,000 shares -- equaling 91.4% of the total 79,489,544.

The company offered shareholders $4.80 per share, which represents a premium of about 45% over the trading price before the offer was made.

That's up from Cox's original offer of $3.80 per share in March -- but still significantly less than last year's peak price of $13 last May and June.

Like other big radio broadcasters, Cox has seen its share price decline steeply over the last couple of years, with the downward trend accelerating during the recession. However, Cox is still better off than most of its competitors. When the first offer was made, Cumulus shares were trading at $1.44, Emmis at $0.59, Radio One at $0.36 and Entercom at $1.09. Both Radio One and Entercom were recently threatened with delisting by Nasdaq and the New York Stock Exchange, respectively, when their stock price fell below $1.00.

Still, Cox must tread carefully with its plan to go private, as other big radio broadcasters have found themselves at risk of defaulting on debts they assumed during share buybacks.

Beasley, which bought back millions of shares from 2005-2008, is said to be at risk of breaching its lending covenants -- especially as the mandated ratio of debt to revenue steps down over the next couple of years. It recently had to renegotiate lending agreements with creditors that demanded the company agree not to buy back more stock until the debt is paid down.